Archives for Laurie Macfarlane

Author: Laurie Macfarlane

Lessons from Shirebrook: Economic change is nothing new – civil society must shape it, or be shaped by it

To say that society is shaped by the relations underpinning the way that economic activity is organized is not a new idea. It is most famously associated with Karl Marx, but you don’t have to be a Marxist to recognise that culture, customs and civic life are all to some degree influenced by economic forces.

Britain’s economy, like other advanced countries, has undergone immense change in recent decades. An economic model that was once highly dependent on manufacturing and mining in the North, Midlands, Scotland and Wales, has given way to one which has prioritised London’s status as a global hub for financial services, while leaving other regions to suffer from industrial decline.

From the 1840s to the 1960s, manufacturing employed roughly 40% of workers. Now it employs only 8%. Between 2005 and 2010 alone, 600,000 manufacturing jobs disappeared. Secure, unionised jobs have been replaced with low skilled, insecure service-orientated roles. Globalisation has swept away entire industries, while advances in computer processing and networked communication has transformed the nature of work. The impact across society has been enormous.

Few places embody these changes more dramatically than Shirebrook, the small town in the Bolsover district of north-east Derbyshire, on the border with Nottinghamshire. A key mining area for over a century, the closure of Shirebrook Colliery in 1993 left a gaping hole economic and social fabric of the community. Today the site of the colliery is still home to the town’s major employer. But the employer is no longer British Coal – it is Sports Direct.

The firm’s national distribution centre was established there in 2005 and employs around 5,000 people. Most are employed on zero-hour contracts, and last year a parliamentary committee said working conditions at the warehouse resembled ‘Victorian workhouse’. A significant number of the workers were recruited from eastern Europe. The council estimates that up to 1,500 people migrant workers arrived in Shirebrook within just a few years.

Such rapid changes have been a source of tension in the community. In last year’s EU referendum, Bolsover returned one of the highest Leave votes, at 70.3%.

For civil society, the challenge is how to adapt in such a fast changing world. Many of the traditional pillars of civil society, such as trade unions and charities, emerged in the context of an economy which no longer exists.

I visited Shirebrook, as part of Civil Society Futures to speak to people about how civil society is responding to these changes. In the village hall I spoke to Ian, a volunteer with the trade union Unite who teaches English to Eastern European migrant workers. He explained that breaking down language barriers is an important way to build cohesion in the workplace and in the community: “We are helping people become members of our community – regardless of where they come from.”

Unite has also pioneered a number of innovative approaches to draw attention to Sports Direct and help affected workers. In 2015, it launched a confidential advice and support line as part of a campaign to confront abusive work practices, and this was followed by a national campaign year in 30 cities, collecting 20,000 signatures on a petition. In 2016 the union won a £1 million back-payment for workers who had been paid less than the minimum wage.

Recent migrants are also contributing to a flourishing of new initiatives designed to build community cohesion. On the main square, I spoke to Natalia, who runs the Two Flags restaurant and café. She explained that she started the café to break down some of the barriers that existed between different cultures in the area: “It’s very important to bring people together from different cultures. My hope is that people will come to (the) café and talk to each other, try new food, and learn from each other.” As well as running the café Natalia also volunteers with the local police and provides translation services for people new to the area.

Change, of course, is nothing new. A cursory review of the history of Shirebrook shows that it has always been a place of change and upheaval. In 1891 the town only had a population of 567, but by 1901 this had increased tenfold to over 6,200 following the opening of the colliery 1896.

People moved to Shirebrook from across the UK and further afield at a scale even bigger than the immigration seen in the last decade. A contemporary account recorded by the Durham Miners’ Museum describes an issue familiar in the town today: “unfortunately the houses were not being built fast enough to satisfy the tremendous growth in population which Shirebrook was experiencing. Some people had to live in tents and huts which were erected in nearby fields. This in turn led to health and hygiene difficulties.”

In that context, a new community came together. In 1898, there was a major strike. Miners were joined by “enginemen and firemen” and shut the pit down, demanding better safety conditions. The mine’s owners tried to bring workers in from Glasgow and South Wales to break the strike, but both accepted train fairs home when they found a picket line. Gradually, conditions improved. The Shirebrook model village – social housing built by the colliery ­– provided homes for the new miners.

In other words, the advent of coal mining itself led to the emergence of new forms of civic society such as trade unions, social clubs, and sports teams – many of which still have a strong presence in the area.

As the example of Shirebrook illustrates, economic change is nothing new. The challenge for civil society is to understand it, to grasp it and to shape it. Looking ahead to the future, this means thinking about the challenges and opportunities posed by climate change, artificial intelligence, automation and an aging population, to name just a few. And let’s not forget about Brexit.

But civil society doesn’t need to be a passive bystander. It can either shape the economy, or be shaped by it. The future of the country hangs in the balance – why should it be left to the state and the market? Civil society can surely lead the way.

18th September 2017

Ten years after the crash, is civil society ready to take on big finance?

Ten years ago the French bank BNP Paribas ceased activity in three hedge funds, announcing that it could no longer measure the value of instruments based on US subprime mortgages.

The event is widely regarded as representing the beginning of the global financial crisis, as what had previously been regarded as minor turbulence in the US housing market became something far more serious. Banks stopped lending to each other and the financial system froze, sending shockwaves around the global financial system. The UK, with one of the biggest, most complex, and most interconnected banking systems in the developed world, was uniquely exposed.

A decade on, and the cost of the crisis – both human and financial – cannot be understated. The cost of bailing out the banks peaked at over £1 trillion, while the cost to the economy in terms of loss of income and output has been much greater. According to Andrew Haldane, the Bank of England’s Chief Economist, the cost may be as high as £7.4 trillion – similar in scale to a World War. Since the crisis real wages in Britain have suffered a larger decline than in any other advanced country apart from Greece. Years of austerity has pushed public services towards breaking point, and falling living standards has seen families resort to desperate measures like using food banks. Mark Carney, governor of the Bank of England, recently described the past ten years as the “first lost decade since the 1860s”.

As each ten-year milestone approaches – from the collapse of Lehman Brothers on September 2008 to the G20 London Summit held on 2 April 2009 – much will be written about the role of each of the major culprits: the reckless bankers, the weak regulators, the captured credit rating agencies and the blind economists. But what about civil society? What is there to learn from the experience of the financial crisis, and what does this mean for the future of civil society?

Civil society’s blind spot?

In 1960 UK banking sector assets totalled £8 billion, or 32% of the country’s annual economic output. By 2010 this had increased to £6,240 billion, or 450% of annual economic output. Relative to the size of the national economy, the UK banking system grew to be the largest among advanced economies, with most of the growth coming in the two decades prior to the crisis.

Despite this rapid increase in the size and influence of the banks and other financial institutions, civil society did not pay much attention to their activities. Of course, organisations such as credit unions have played a key role in local communities for many years. But in the run up to the crisis few organisations asked difficult questions about the financial sector as a whole, or asked whether it was serving the long-term interests of society.

Of course, civil society was not alone in failing to see the crisis coming. The vast majority of macroeconomists were caught entirely off guard, as were the regulators whose job it was to prevent such crises from happening. While the economy was hurtling towards catastrophe, central bankers were hailing the arrival of the ‘Great Moderation’ and Gordon Brown had declared the end of ‘boom and bust’.

Nonetheless, one of the roles of civil society is to ask difficult questions and to challenge power. While it would be unfair to pass blame for failing to foresee the crisis, elements within civil society could and should have acted more courageously to challenge the power of the City of London. But too often they found it easier to look the other way.

Too little, too late

Once the crisis hit, civil society organisations scrambled to come to terms with what happened, and what it meant for them. Few organisations were well placed to respond quickly. A longstanding perception that finance was a technocratic field best left to experts had left civil society woefully underequipped to intervene, despite the fact that civil society organisations are perfectly capable of getting their heads round other complex issues. Moreover, civil society’s capacity was reduced just as it was needed most, as funding sources started to dry up amid the economic fallout. Without a coherent analysis of what went wrong and what needed to happen, civil society struggled to make its voice heard in the process of reform that followed.

Despite this, there were a number of positive developments. The crisis triggered an awakening on issues of banking and finance, and gave birth to a dynamic new movement dedicated to the cause of financial reform. New organisations such as Positive Money, the Finance Innovation Lab and Move Your Money were established, and alongside older organisations like the New Economics Foundation set out explain the workings of the financial system and repurpose it for the common good. But despite some heroic efforts, these organisations inevitably faced an uphill struggle against the lobbying might of the sector and the ‘insider’ culture of the regulators.

It is difficult to know exactly how much the sector spends on lobbying, but an investigation by the Independent Bureau of Investigative Journalism revealed that City of London firms provided more than 50% of the Conservative party’s funding in 2010, the year of David Cameron’s general election victory. In 2012, a similar investigation revealed that the British financial services industry spent £92 million in one year lobbying politicians and regulators. Combined with the serial ‘revolving door’ culture between the industry and the regulators, it’s easy to see how civil society’s voice was drowned out.

While the limited reforms did rein in some of the worst excesses, it wasn’t long before intense lobbying from the sector led to them being watered down or rolled back. By 2015 this had paid off, as George Osborne announced a ‘new settlement’ between policymakers and the City and quietly passed a string of concessions to big banks in areas of tax and regulation. Then, in December 2015, Bank of England Governor Mark Carney declared that “the post-crisis period is over”. The message was clear: the financial system had been fixed, lessons had been learned, and it was time to move on. We could return to business as usual.

What next for the future?

As memories of the crisis fade, it is essential that civil society doesn’t roll over to the demands of bank lobbyists. Many experts outside the industry-regulator nexus warn that financial reforms went nowhere near far enough, and have predicted that another crash could be just around the corner. The Systemic Risk Council, a group of global experts on financial stability, recently warned G20 leaders that the global financial system is vulnerable to another crisis. This time round, they warn, central banks and governments will have far less ammunition available to respond. Similar warnings have come from the Bank for International Settlements, which recently said that another global financial crisis could soon hit “with a vengeance”.

Now, with Brexit on the horizon, the risk is even greater. As more banks start to shift operations abroad, the government has indicated that it may respond by slashing regulation in a bid to stem the outflow of business. Media outlets have reported that bank executives and lobbyists are already working hard behind the scenes to turn Brexit to their advantage.

To avoid history repeating itself, there is an urgent need to strengthen civil society’s voice on finance, and develop a credible and effective counterweight to the lobbying power of the banks. We must also work to transform our broken financial system to ensure that finance serves society, not the other way around.

What does this mean in practice? Firstly, it means establishing a credible and well resourced civil society voice on banking and finance. This isn’t a new idea – in 2011 the European Parliament established a new independent NGO called Finance Watch. This organisation receives public funding from the EU, and is tasked with acting as a public interest counterweight to the powerful financial lobby. While Finance Watch’s expert staff are still vastly outnumbered by industry representatives in the corridors of Brussels, the organisation has played a vital role educating lawmakers and the public about the financial system. As Britain starts to plan a future outside of the EU, plugging this gap with a new UK-focused organisation will be vital.

Secondly, civil society must begin the long hard task of transforming our banking sector. The UK has among the most concentrated banking sector in the developed world, and is uniquely dependent on commercial, profit maximising banks. The banking sector channels billions into the economy each year, however most of this flows into property and financial markets, inflating asset prices and destabilising the economy. In other countries, the banking sector plays a more positive role by investing sustainably in local communities, and these banks are often characterised by ‘stakeholder’ ownership and governance. In other words, the mission of the bank is not to maximise profits but to optimise returns to a range of stakeholders, including customers and the broader local economy. Empirical evidence shows that these institutions, such as co-operatives, mutuals and public savings banks, perform much better than their large competitors on measures of financial stability, local economic development, business lending, and financial inclusion.

Learning from best practice around the world, steps should be taken to increase the diversity of the banking sector and create new institutions which serve the interests of businesses and local communities. Initiatives like the Community Savings Banking Association are already doing this from the bottom-up, but much remains to be done before these models can achieve the scale required to make an impact.

But reforming the banking sector is merely the tip of the iceberg. The financial sector’s grip over of our politics and economy did not happen in a vacuum – it is the result of a set of deliberate political choices to rewrite the rules of our economy. The UK’s sprawling financial sector was, and still is, the pinnacle of neoliberalism – the economic system which has allowed privatisation, deregulation, and market logic to penetrate every area of society.

The financial crisis was one product of this system. But challenges such as poverty, inequality, alienation, climate change and homelessness cannot be separated from the economic system which breeds them. To overcome these issues, civil society must go beyond simply ameliorating symptoms, and start tackling root causes. This means challenging the tenets of neoliberalism itself, and working together to build a fairer and more sustainable alternative.

11th August 2017

Playback: Marks Gate

Civil Society Futures Marks Gate workshop

The basics:

Who? Active citizens of Marks Gate, Barking and Dagenham

What? Discussing the future of Marks Gate, and the forces shaping it

Where? St Marks Church, Barking.

When? 6:30pm, 27th June, 2017

Why?  This was part of Goldsmith’s research

Insights: (what stood out for you?)

It was clear that people in the workshop had a range of shared concerns, particularly a lack of opportunities for young people. There was also concern for community safety, as some people saw knife crime as a barrier to engaging young people in civil society. While there was evidence of a strong civil society ecosystem, it was apparent that some key organisations and places had disappeared in recent years due to growing resource pressures.

So what?

What does this tell you about civil society in the future?

A key challenge identified was a lack of funding for civil society organisations, which means that a lot of activity in the area relies on volunteers who can easily get burnt out or overworked. As a result, some important civil society institutions have disappeared from the area in recent years. Looking ahead, civil society faces the challenge of trying to grow, adapt and expand in a difficult economic climate with limited public funds available.

What are the drivers (or barriers) of change in civil society that came out for you?

Drivers: There is a strong community spirit and a shared desire to create more opportunities for young people.

Barriers: High levels of deprivation and debt, violent crime, high housing costs, government spending cuts and rapid changes in the local housing market.

What are the new emerging models/forms of civil society?

North Meets South Big Local (NMSBL) is a partnership which works to strengthen and grow the local community. Each year the group receives £1m from the Local Trust to spend on what the local area needs. To prioritise spending, NMSBL holds an annual ‘Dragon’s Den’ event where members of the community submit ideas and vote on the projects they’d like to see start up in the area. The picture below shows what the community priorites were in last year’s Dragon’s Den.

 

What is the question you are now left with?

How can civil society grow and expand in places like Marks Gate which face a challenging socio-economic environment?

 

29th June 2017